A municipal tax lien may signal a foreclosure is in the works, or it could simply mean a very careless owner. And even if a foreclosure does eventually happen, it could take years to progress that far.
QUESTION: I own a condominium in a small building. I recently learned that a tax lien has been placed on the unit above me which is owned by an absentee owner and rented out.
What does a tax lien mean? A possible foreclosure?
I am interested in monitoring this situation and possibly purchasing the unit if it should become available. Is this possible? And how should I proceed?
ANSWER: Proceed with extreme caution. A municipal tax lien may signal a foreclosure is in the works, or it could simply mean a very careless owner. And even if a foreclosure does eventually happen, it could take years to progress that far. And keep in mind that all during the foreclosure process (and even afterwards), the owner has the opportunity to settle the matter.
What you should be monitoring is whether the tax lien is a tip off to something else that may be happening with the property. For example, there may be a foreclosure on the mortgage itself which is a much quicker process.
To find out what is going on with the property, you could go to the local Registry of Deeds or hire a title examiner to do a rundown on the property to check for other liens or activities happening on the property. You should also keep an eye on the local newspapers, watching for advertisements of foreclosure auctions or tax sales on the property.
You obviously think you can get a bargain on the property by buying it at auction. While you may get a better price at a foreclosure auction than you would in a usual arm's length transaction, you could also end up with a whole lot of problems.
You said there are tenants in the unit. If you bought the property at auction, you might end up having to evict tenants - not an easy or cheap proposition and not something you ordinarily have to do in a usual arm's length transaction.
Also keep in mind that even after the sale, the owner typically has a certain amount of time to reclaim the property by settling the lien.
In summary, trying to purchase a property in the manner you propose is not for the faint-of-heart. Most municipal tax liens tend to get resolved. And for those that don't, you need good advice and a lot of patience.
Linda Goodspeed is a longtime real estate writer and author of “In and out of Darkness.” Email her at: email@example.com.